I am Jia Jia, an equity incentive design and management platform. Just these days, I analyzed the VIE architecture of Tongcheng Yilong. VIE Architecture of Tongcheng Yilong

In March p>218, Tongcheng Yilong completed the merger. Tongcheng Yilong submitted a prospectus to the Hong Kong Stock Exchange three months after the merger was completed. According to the prospectus, due to the needs of the main business, in order to meet China's foreign investment access conditions for related businesses, the proportion of foreign investors holding the company's equity in online information service business, online data and transaction processing business, air ticket agency business and insurance agency service business should not exceed 5%. In addition, in order to meet the newly revised "Narrowly Tailored" standard applicable to VIE structure review by the Hong Kong Stock Exchange in April 218, Tongcheng Yilong adopted two "5% shareholding+insurance agency service" standards.

VIE framework enables the parent company registered in Cayman to finally control the domestic companies in China through an agreement, so that it can operate domestic enterprises, distribute and transfer profits according to the wishes of the foreign parent company, and finally transfer the operating profits to the overseas parent company after paying taxes.

The basic structure of p>VIE architecture is divided into three layers:

The top layer is the shell of overseas holding companies, which is used for listing and accepting financing, and basically has no actual operation. Generally located in tax havens, such as Cayman and British Virgin Islands, for tax avoidance.

WFOE, which is located on the second floor in China, is a wholly foreign-owned enterprise, and has no business operation due to policy restrictions.

The bottom layer is the domestic operating entity. Generally, WFOE is allowed to exercise shareholders' voting rights over domestic operating entities through control agreements, and to appoint directors and senior managers to make business decisions, so that WFOE becomes the actual controller.

the founder and management team of the company set up an offshore company called "shell company", which means eLong Cayman in the VIE framework of Tongcheng eLong. In order to introduce strategic investment or implement equity incentives, usually the founder and VC, PE and other shareholders set up a company together, as the main body of listing, which refers to Tongcheng Yilong in the VIE framework of Tongcheng Yilong. Then set up one or more wholly-owned subsidiaries (WFOE) in China, which refer to Longyue Tiancheng WFOE and Yilong Beijing WFOE in the framework of Tongcheng Yilong VIE. Longyue Tiancheng WFOE and Yilong Beijing WFOE signed a series of agreements with domestic business operating entities, namely Beijing Yilong, Tongcheng Network and Suzhou Chengyi, to achieve the purpose of sharing profits, controlling and operating the interests of domestic operating entities, so that domestic operating entities meet the VIE framework conditions and achieve the purpose of consolidating statements with overseas listed entities.

according to the prospectus, longyue tiancheng WFOE provides exclusive technical and consulting services for Suzhou chengyi, and the fees for technical services and software licenses provided shall be 1% of the total consolidated profits of Suzhou chengyi in any financial year. And in its exclusive rights purchase agreement, it shows that the registered shareholders in Wu Zhixiang and Ma Heping hold 1% of the shares of Suzhou Chengyi, and the registered shareholders of Suzhou Chengyi pledge all the shares of Suzhou Chengyi to Longyue Tiancheng WFOE.

meanwhile, longyue tiancheng WFOE provides exclusive technical and consulting services for Tongcheng network, and the fees for technical services and software licenses provided shall be 1% of the total consolidated profits of Tongcheng network in any year. In its annex agreement, it shows that Tongcheng Network intends to transfer 5% of the shares to Longyue Tiancheng WFOE, and the registered shareholders of Tongcheng Network pledge all the shares of Tongcheng Network to Longyue Tiancheng WFOE.

In addition, eLong Beijing WFOE provides exclusive technical services and consulting services to Beijing eLong, and the fees for technical services and software licenses provided shall be 1% of the total consolidated profits of Beijing eLong in any year. According to the agreement, Jiang Hao and Zhou Rong transfer their 5% shares of Beijing eLong to Beijing WFOE, and Jiang Hao pledges their entire shares of Beijing eLong to Beijing WFOE.

VIE agreement shows that (1) WFOE directly holds 5% of the shares of Tongcheng network, and the remaining 5% of the shares are held through VIE agreement. ⑵ Long Yue Tian Cheng (WFOE) realized 1% holding of Suzhou Chengyi through VIE agreement. ⑶ eLong Beijing (WFOE) directly holds 5% shares of Beijing eLong, and the remaining 5% shares are held through VIE agreement. Through this form, it not only meets the requirements of limiting the proportion of foreign equity, but also meets the requirements of the newly revised VIE framework audit standard.